Regulatory policies in the global Islamic banking sector in the outbreak of COVID-19 pandemic

Walid Mansour (), Hechem Ajmi () and Karima Saci ()
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Walid Mansour: University of Carthage
Hechem Ajmi: International Islamic University
Karima Saci: DAR AL-HEKMA University

Journal of Banking Regulation, 2022, vol. 23, issue 3, No 3, 265-287

Abstract: Abstract This paper forecasts the response of Islamic banks’ dynamics (size, profitability, nonperforming financing, and stability) to the COVID-19 pandemic over the period ranging from 2019Q4 to 2021Q4. Nine jurisdictions are considered based on their Islamic banks’ systemic importance, namely Bahrain, Brunei, Indonesia, Kuwait, Malaysia, Pakistan, Saudi Arabia, Turkey, and UAE. Using the bivariate VARX model, our forecasting exercise shows that the Islamic banks’ response to the COVID-19 pandemic is not uniform across jurisdictions. While the Islamic banks’ dynamics in Saudi Arabia, UAE, and Kuwait are less likely to be impaired, Bahrain, Brunei, Malaysia, Pakistan, and Turkey are expected to be relatively more affected especially in terms of their size growth. Saudi Arabia will continue leading the growth momentum of the global Islamic banking sector, and its Islamic banks’ assets are expected to reach at least $185.4 billion by the end of the fourth quarter of 2021. This paper recommends a prioritization approach for the implementation of the policy measures by the jurisdictions based on their banks-specific responses to the COVID-19 pandemic.

Keywords: Islamic banks; COVID-19 pandemic; Forecasting; VARX (search for similar items in EconPapers)
JEL-codes: C53 G17 G21 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (1)

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DOI: 10.1057/s41261-021-00147-3

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